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REPORT OF THE ’ RESPONSIBILITY FOR FINANCIAL STATEMENTS

The Board of Directors is responsible for the separate The Committee, whose members are independent financial statements of the Company and the directors, was designated by the Board to review the consolidated financial statements of the Company quality of the financial reporting and the effectiveness and its subsidiaries, as well as the financial information of internal control system, and report the review stated in the Company’s . These results to the Board. financial statements are prepared in accordance with Thai Standards and Thai Financial In this regard, the Board has the opinion that the Reporting Standards promulgated by the Federation overall internal control system of the Company is of Accounting Professions and according to generally satisfactorily effective, and can reasonably assure the 53 accepted accounting principles in Thailand. reliability of the separate financial statements of the - Appropriate accounting policies are chosen and Company and the consolidated financial statements consistently applied, estimates and underlying of the Company and its subsidiaries for the year ended assumptions are prudently made, and significant 31 December 2013. information is adequately disclosed in the Notes to the financial statements to ensure that the financial statements are reliable and of benefit to shareholders Kitchen of theWorld and investors.

The Board of Directors has established and maintained an effective internal control system in order to provide a reasonable assurance that accounting records are accurate, complete and adequate for the protection of Company as well as preventing fraud and materially irregular transactions.

Mr. Dhanin Chearavanont Mr. Adirek Sripratak Chairman of the Board President of Directors and ’s Discussion and Analysis

(2) Consolidated statements of income of CPF and its subsidiaries for the year ended 31 December 2012 and 2013

2012 2013

THB mn. % THB mn. %

Revenue from sale of goods 357,175 95 389,251 97 Gains on changes in of investment in associates 8,673 2 - - Gains on sale of investments 6,009 2 8,219 2 Others 2,996 1 2,107 1

Total income 374,853 100 399,577 100

Cost of sale of goods 315,838 84 350,394 88 Losses (gains) on changes in fair value of biological assets (229) - (524) - Selling and administrative 33,260 9 36,963 9 costs 6,377 2 7,937 2 Others 52 - 219 - 45 - Total expenses 355,298 95 394,989 99

Share of profits of associates and jointly-controlled entities 4,139 1 4,947 1

Profit before income 23,694 6 9,535 2

Income tax expense 2,675 1 133 - Kitchen of theWorld for the year 21,019 5 9,402 2 Non-controlling interests (2,229) - (2,337) -

Profit for the year attributable to holders of the Company 18,790 5 7,065 2

(3) Consolidated statements of comprehensive income for the year ended 31 December 2012 and 2013

(Unit : THB mn.) 2012 2013

Profit for the year 21,019 9,402 Other comprehensive income (loss) for the year, net of income tax expense 5,339 4,905

Total comprehensive income for the year 26,358 14,307 Non-controlling interests (2,439) (3,596)

Total comprehensive income for the year attributable to equity holders of the Company 23,919 10,711 (4) Consolidated statements of flows for the year ended 31 December 2012 and 2013

(Unit : THB mn.) 2012 2013

Net cash provided by operating activities 529 9,452 Net cash used in investing activities (59,494) (24,222) Net cash provided by financing activities 46,449 17,792

Net increase (decrease) in cash and cash equivalents (12,516) 3,022 Cash and cash equivalents at the beginning of the year 23,993 12,250 Effect of exchange rate changes on the balances held in foreign currencies 773 1,908

Cash and cash equivalents at end of year 12,250 17,180

(5) Key financial ratios of the consolidated financial statements of CPF and its subsidiaries

2012 2013 46 - Liquidity ratios Current ratio 1 (times) 1.15 1.08 Quick ratio 2 (times) 0.37 0.41 Cash flow liquidity ratio 3 (times) 0.01 0.09 Accounts receivable turnover 4 (times) 17.93 16.00 Annual Report Collection period 5 (Days) 20 23 turnover ratio 6 (times) 33.14 28.86 Inventory turnover 7 (Days) 11 12 Accounts payable turnover 8 (times) 19.52 16.49 Payable period 9 (Days) 18 22 Cash Cycle 10 (Days) 13 13

Profitability ratios Gross profit margin 11 (%) 11.57 9.98 Operating profit margin 12 (%) 8.42 4.49 Net profit margin 13 (%) 4.96 1.74 Return on Equity 14 (%) 20.00 5.64

Operating efficiency ratios Return on fixed assets 15 (%) 35.43 14.53 turnover 16 (times) 1.61 1.20

Leverage ratios Debt to equity 17 (times) 1.57 1.82 Interest coverage 18 (times) 0.08 1.25 Debt service coverage 19 (times) 0.01 0.15 Dividend payout 20 (%) 105.79 56.32 Management’s Discussion and Analysis

This management’s discussion and analysis is investment are disclosed in No.4 combination a discussion based on CPF and its subsidiaries’ by acquisition of shares of the notes to the financial consolidated financial statements ended 31 statements for the year ended 31 December 2013. December 2013. The information includes the financial statements of CPF and its subsidiaries (“The The amounts of assets acquired and liabilities assumed Company”) as disclosed in No. 1 General Information at the acquisition date is as follows: of the notes to financial statements. (Unit : THB mn.) In 2013, the significant event affected the preparation Cash and cash equivalents 948 and presentation of the Company’s consolidated receivables 8 financial statements for the period ending 31 149 December 2013 is as follow: Biological assets 524 Other current assets 76 Business combination by acquisition of shares Property, plant and equipment 2,914 During the fourth quarter of 2013, the Company Other non-current assets 39 acquired shares of Russia Baltic Pork Invest ASA Borrowings (2,635) 47 (“RBPI”), a Norwegian registered company that has Trade and other payables (124) - 100% direct and indirect investments in 8 subsidiaries Other current liabilities (46) involving in swine farming and related in Deferred tax liabilities (32) Russia. As a result, RBPI became a new subsidiary of the Company. The Company’s financial statements Net assets 1,821 as of 31 December 2013 included the statements of Deduct non-controlling interests (772) financial position of RBPI. The Company has applied Group’s ownership interest 1,049 Kitchen of theWorld Thai Financial Reporting Standards (“TFRS”) No. 3 628 (revised 2009) Business Combinations to recognise Consideration transferred 1,677 the business combination transaction. Details of the

1 Current ratio = Total current assets / Total current liabilities 2 Quick ratio = (Cash and cash equivalents + Short term investment + Accounts receivable - trade and others) / Total current liabilities 3 Cash flow liquidity ratio = Net cash provided by operating activities / Average current liabilities 4 Accounts receivable turnover = Net sales / Average accounts receivable - trade and others 5 Collection period = Average accounts receivable / Total *360 6 Inventory turnover ratio = Cost of sale of goods / Average finished goods 7 Inventory turnover = 360 / Inventory turnover ratio 8 Accounts payable turnover = Cost of sale of goods / Average accounts payable 9 Payable period = 360 / Accounts payable turnover 10 Cash Cycle = Average collection period + Inventory turnover – Payable period 11 Gross profit margin = Gross profit / Net sales 12 Operating profit margin = Profit before finance costs and income tax expense / Net sales 13 Net profit margin = Net profit / Total revenues 14 Return on Equity = Net profit / Average shareholders’ equity 15 Return on fixed assets = (Net profit + ) / Average fixed assets 16 Asset turnover = Total revenues / Average total assets 17 Debt to equity = Total liabilities / Total shareholders’ equity 18 Interest coverage = Net cash provided by operating activities / Interest expenses 19 Debt service coverage = Net cash provided by operating activities / (Debt payment + Investment expenses + Purchase of assets + Dividend paid) 20 Dividend payout = Dividend paid / Net profit of the Company’s separate financial statements Being shareholder of RBPI not only to accelerate by the outbreak of the Early Mortality Syndrome the expansion of the Company’s swine businesses in (“EMS”), which resulted in the 10% drop in revenues Russia, but the collaboration between the Company of the aquatic business. and RBPI is also likely to increase the swine production efficiency and further enhance the growth potential of The Company’s net profit for 2013 was THB 7,065 swine businesses in the Russian market due to its large million, a drop of 62% from the previous year’s net scale and insufficient domestic pork supply. profit of THB 18,790 million due to: (1) in the first quarter of 2012, the Company realized gains on 1. Operating Results changes in fair value of investment in C.P. Vietnam (1) Overview of Operating Results (“CPV”) of THB 8,673 million, which is in The Company continued to see growth in revenues, and accordance with Thai Financial Reporting standards reported the 2013 consolidated sales of THB 389,251 and was a non-recurring transaction and (2) the million, a 9% increase from 2012. Thailand operations significant drop in the operating profits of the aquatic generated a 3% growth while international operations business mainly due to the EMS epidemic that has hit saw a 14% increase in revenues mainly from the the Thai shrimp industry at the end of 2012, which growth of livestock businesses of 13%. On the other resulted in a dramatic decrease in sales of Thailand 48 - hand, the Thai shrimp industry was materially affected operations aquatic business.

(2) Operating Performance of Each Business Line Annual Report 2011 2012 2013

THB mn. % THB mn. % THB mn. %

1. Thailand Operations Feed 53,166 26 56,815 16 51,243 13 Farm 64,456 31 61,600 17 69,922 18 Food 36,527 18 41,009 12 43,177 11

Total Sales - Thailand Operations 154,149 75 159,424 45 164,342 42

2. Overseas Operations Feed 25,994 13 148,321 41 164,348 42 Farm 23,371 11 45,679 13 55,583 15 Food 2,585 1 3,751 1 4,978 1

Total Sales - International Operations 51,950 25 197,751 55 224,909 58

Total from Sales 206,099 100 357,175 100 389,251 100 Management’s Discussion and Analysis

Operating Results by and 2. Changes in Other Comprehensive Business Line Income In 2013, changes in other components of shareholders’ Thailand Operations equity after tax presented in the Company’s Total sales generated from Thailand operations for comprehensive income amounted to THB 4,905 2013 totaled THB 164,342 million, a 3% increase million. This was mainly due to an increase in currency from last year’s sales of THB 159,424 million with translation differences of THB 6,587 million as a result the following details: of Thai baht depreciation as of 31 December 2013 comparing to the same date of last year. Domestic Sales Domestic sales rose from THB 128,562 million in 2012 3. Financial Status to THB 134,362 million in 2013. Sales from livestock (1) Assets business increased THB 15,266 million, a 15% increase The Company’s total assets as of 31 December 2013 which was mostly due to improving average meat was THB 365,003 million consisting of current assets prices. However, sales from aquatic business dropped of THB 124,243 million, land, buildings and equipment THB 9,466 million or 35% from the EMS outbreak in of THB 110,931 million along with another THB 49 the Thai shrimp industry. 129,829 million in long-term investments and others. -

Export Sales Assets as of 31 December 2013 increased by 18% Export sales for 2013 totaled THB 29,980 million, over last year mostly from the increase in land, a 3% reduction from THB 30,862 million earned in buildings and equipment, investments in affiliated 2012. Exports of livestock business increased by THB companies and jointly-controlled companies as well 2,440 million or 15% while exports of aquatic business as cash and cash equivalents. Kitchen of theWorld dropped by THB 3,322 million or 22% of last year. (2) Liquidity The gross profit margin of Thailand operations for Net operating cash flows for 2013 totaled THB 9,452 2013 was 9%, a decline from the 12% achieved in million while net cash used in investment activities 2012, which mainly due to the impact to the aquatic totaled THB 24,222 million. Net cash provided by business caused by the EMS epidemic in Thai shrimp financing activities was THB 17,792 million derived industry. from net borrowing totaling THB 31,608 million. Net cash used in interest payment, dividend payment International Operations and others totaled THB 13,816 million. Cash and cash Total sales generated from international operations equivalents (net of over draft) as of 31 December 2013 totaled THB 224,909 million increased by 14% over totaled THB 17,180 million. last year’s THB 197,751 million. Livestock business sales increased by THB 20,929 million or 12% and Liquidity ratio as of 31 December 2013 was 1.08 aquatic business sales increased by THB 6,229 million times, declined from the previous year’s 1.15 times or 24%. while cash cycle as of 31 December 2013 and 2012 was 13 days. The gross profit margin of international operations in 2013 was 11%, close to the level of last year. As of 31 December 2013, the Company was obliged Details of CPF’s outstanding debentures as of 31 to make payments on long-term borrowings and December 2013 totalled THB 69,260 million are as debentures amounting to THB 11,512 million in 2014, follows: THB 12,599 million in 2015, THB 14,562 million in 2016 and THB 82,007 million for the period between 2017 through 2041.

Amount Maturity Maturity Term Coupon Rate per Issued Date (THB mn.) Date (Years) Annum (%)

1. CPF Debenture #1/2009 Series 2 3,200 25 Nov 2009 25 Nov 2014 5 4.30

2. CPF Debenture #1/2009 Series 3 3,000 25 Nov 2009 25 Nov 2015 6 4.80

3. CPF Debenture #2/2009 1,000 22 Dec 2009 30 May 2015 5 years 5 months 4.40 8 days 50 - 4. CPF Debenture #1/2010 1,000 11 Feb 2010 30 May 2015 5 years 3 months 4.20 19 days

5. CPF Debenture #2/2010 Series 1 3,000 3 Nov 2010 3 Nov 2014 4 Year 1-3 = 3.00% Year 4 = 4.00% Annual Report 6. CPF Debenture #2/2010 Series 2 5,000 3 Nov 2010 3 Nov 2017 7 Year 1-3 = 3.00% Year 4-5 = 4.00% Year 6-7 = 5.00%

7. CPF Debenture #1/2011 Series 1 3,000 19 Aug 2011 19 Aug 2018 7 4.65

8. CPF Debenture #1/2011 Series 2 3,000 19 Aug 2011 19 Aug 2021 10 4.87

9. CPF Debenture #1/2011 Series 3* 4,000 19 Aug 2011 19 Aug 2041 30 5.42

10. CPF Debenture #2/2011* 6,000 21 Dec 2011 21 Dec 2041 30 5.42

11. CPF Debenture #1/2012 6,060 15 Mar 2012 15 Mar 2016 4 4.17

12. CPF Debenture #2/2012 Series 1 6,000 3 Aug 2012 3 Aug 2019 7 Year 1-4 = 4.35% Year 5-7 = 5.00%

13. CPF Debenture #2/2012 Series 2 4,000 3 Aug 2012 3 Aug 2022 10 Year 1-4 = 4.40% Year 5-9 = 5.00% Year 10 = 6.00%

14. CPF Debenture #2/2012 Series 3* 5,000 3 Aug 2012 3 Aug 2032 20 5.30 Management’s Discussion and Analysis

Amount Maturity Maturity Term Coupon Rate per Issued Date (THB mn.) Date (Years) Annum (%)

15. CPF Debenture #1/2013 6,000 9 May 2013 9 May 2018 5 3.93

16. CPF Debenture #2/2013 Series 1 2,000 2 Aug 2013 2 Aug 2017 4 4.04

17. CPF Debenture #2/2013 Series 2 2,500 2 Aug 2013 2 Aug 2019 6 4.54

18. CPF Debenture #2/2013 Series 3 5,500 2 Aug 2013 2 Aug 2021 8 4.90

* Debenture with holders’ early redemption right at the end of year 15

(3) Sources of Funds As of 31 December 2013, the Company’s debt to equity ratio was 1.82 times while net debt to equity ratio computed based on the specified Terms and Condition of debenture issuers and holders for the outstanding debentures are as follows: 51 - Net Gearing Ratio (Times)

Debentures issued before CPF debenture #2/2013/1 1.64

CPF debentures #2/2013/2 1.25

Note: The net debt to equity ratio which CPF has to maintain under the specified Terms and Condition of debenture issuers and holders Kitchen of theWorld for all debentures is no more than 2.00:1.00. The ratio is computed based on the reviewed/audited consolidated financial statements as of 30 June and 31 December in each (as the case may be).

Total liabilities of the Company amounted to THB THB 77,230 million is short-term while THB 109,175 235,430 million, a 24% increase resulting from an million is long-term borrowings. increase of THB 40,202 million in interest bearing liabilities and THB 5,465 million in non-interest As of 31 December 2013, shareholders’ equity totaled bearing liabilities. The total liabilities is comprised of THB 129,573 million, an increase of 7% over the non-interest bearing liabilities and interest bearing previous year as a result of an increase in “currency liabilities of THB 49,025 million and THB 186,405 translation differences” due to a depreciation of Thai million, respectively. Of the interest bearing liabilities, Baht.

/1 Net debt = Total liabilities - Cash and cash equivalents + Guarantee to any persons or juristic persons excluded (1) guaranteed by CPF to its subsidiaries and guaranteed by CPF’s subsidiaries to CPF and (2) deferred tax liabilities /2 Net debt = Total interest-bearing liabilities excluded liabilities under financial lease agreements - Cash and cash equivalents and current investments (4) Capital Expenditure Plan for 2014-2018 per share on 6 September 2013. Therefore, the The tentative capital expenditure for 2014-2018 second dividend payment will be THB 0.25 per share. totals approximately THB 50,000 million. Domestic The Board of Directors will propose the said dividend investments will focus on enhancing value to payment to the Annual General Shareholders’ existing businesses while overseas investments will Meeting No. 1/2014, to be held on 25 April 2014 for be mainly for business expansion and penetration further approval. of new markets. The capital expenditure may be subject to change depending on the prevailing market (6) Factors that may impact the Company’s Future 52 conditions. Performance - Despite the Company having in place a robust risk (5) Dividend Payment management process to ensure that risks are under In accordance with the Company’s dividend policy, the appetite levels as mentioned under “Risk Factors” the sum for dividend payments for each year’s section, there is still a chance that risk mitigation may

Annual Report operating results will be approximately 50% of net not be effective enough to keep the risks under the profit after tax and legal reserve requirements (based risk appetite levels, which lead the performance to on the separate financial statements of the Company). be below expectation due to uncontrollable external On 24 February 2014, the Company’s Board of factors. An example would be the control of EMS Directors passed a resolution to approve a dividend epidemic which requires co-operation from relevant payment to shareholders of THB 0.50 per share in perties; continuous economic uncertainties across the total. The Company paid the first dividend payment globe and even political instability. to shareholders, as an interim dividend of THB 0.25